Does Competition Destroy Ethical Behavior?

Andrei Shleifer

No 10269, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Explanations of unethical behavior often neglect the role of competition, as opposed to greed, in assuring its spread. Using the examples of child labor, corruption, excessive' executive pay, corporate earnings manipulation, and commercial activities by universities, this paper clarifies the role of competition in promoting censured conduct. When unethical behavior cuts costs, competition drives down prices and entrepreneurs' incomes, and thereby reduces their willingness to pay for ethical conduct. Nonetheless, I suggest that competition might be good for ethical behavior in the long run, because it promotes growth and raises incomes. Higher incomes raise the willingness to pay for ethical behavior, but may also change what people believe to be ethical for the better.

JEL-codes: D41 L31 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-com, nep-hpe, nep-lam and nep-mic
Note: CF IO LS LE
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Citations: View citations in EconPapers (286)

Published as Shleifer, Andrei. "Does Competition Destroy Ethical Behavior?," American Economic Review, 2004, v94(2,May), 414-418.

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